ntusbfcas | Ethnic politics and the 2017 Kenyan elections

by Rafiq Raji, PhD

Two tight opinion polls on the frontrunners of the 2017 Kenyan presidential election just weeks to the 8 August vote made writ large how potentially contentious the outcome could be. [1] For the first time since campaigns began, one poll had the leading opposition candidate, Raila Odinga of the National Super Alliance (NASA), ahead of incumbent president, Uhuru Kenyatta of the Jubilee Party. The Infotrak Harris opinion poll conducted on 16-22 July put Mr Odinga ahead of Mr Kenyatta by one point, with the former rising in popularity to 47 percent, a 3-point gain from about 2 weeks before.[2] Mr Odinga’s improved chances stemmed from holding on to his key support base, as well as securing new supporters from what used to be the Rift Valley and North Eastern provinces (now a couple of counties), strongholds of the ruling Jubilee Party. Another poll, that by Ipsos, taken on 2-12 July, put both leading contenders at a tie at 45 percent. The Ipsos survey was probably behind the curve in light of its earlier date. Judging from how the media initially under-reported Mr Odinga’s gains, the establishment was clearly shocked.[3]

Not long thereafter, Mr Odinga made a surprise appearance at a televised presidential debate that he and Mr Kenyatta had earlier indicated they would not attend.[4] There was much concern about the reluctance of the candidates to debate each other ahead of the elections. In the vice-presidential debate for instance, only one candidate showed up. Independent deputy presidential candidate Eliud Muthiora Kariara debated himself in mid-July as his rivals found excuses ranging from disagreement with the format to not being formally invited for staying away.[5] Mr Kenyatta’s no-show at the debate was a little surprising considering his campaign cancelled an earlier scheduled trip to Samburu and Marsabit districts in the former Rift Valley and Eastern provinces respectively on the day of the debate.[6] His decision might prove costly: Mr Odinga had the stage entirely to himself.[7] In his defense, Mr Kenyatta asserted the debate would have been a waste of his time, preferring as he put it, to be commissioning projects.[8] NASA stalwarts think he simply fell for their trick: Kalonzo Musyoka, Mr Odinga’s running mate, said he deliberately stayed away from the deputy-presidential debate in a calculated scheme to snare the Jubilee camp into thinking the head of the NASA ticket would similarly not attend the presidential one. They probably have a point, because it is highly unlikely Mr Kenyatta would have ceded 90 minutes of primetime television and radio to his opponent otherwise.

Whether Mr Kenyatta’s debate miss would have an impact on the election results remains to be seen, however. But should Mr Kenyatta lose the election, one of the reasons would almost certainly be because he allowed Mr Odinga to have the undivided attention of the country for more than an hour without the chance to make his own case.[9] Such is the level of uncertainty now that there is talk of a likely second round vote. And even before the debate upset, an objective assessment would have revealed Mr Odinga was probably in a far stronger position than the media, or in fact the opinion polls, suggested. Mr Odinga’s coalition of popular politicians from the major ethnic groups, his populist rhetoric, and the electoral reforms he successfully pushed for, could sufficiently tilt the balance in his favour. That is, barring any major adverse events, of which there are already a few. An ongoing cholera outbreak and the perennial terrorist threat from Somali Al-Shabaab militants are examples of threats that could instigate measures by the authorities with potentially dampening effects on voter turnout on election day.

Ethnic arithmetic favours opposition coalition
Although the 2017 elections would be the second since the new 2010 constitution, which allowed for the devolution of powers to the counties, was adopted, it would also be the first since citizens got a taste of how much power the counties now wield. And it is increasingly obvious a couple of counties might decide the election, judging from the amount of time the two leading candidates dedicated to them during the campaigns. They are Narok, Kajiado, Kisii, Baringo, and those in the former Coast and Western provinces.[10] Even so, a lot of voters are expected to decide along ethnic lines.[11] Mr Kenyatta, who is Kikuyu, the country’s largest tribe and 17 percent of the population (2009 census), and his deputy, William Ruto, who is Kalenjin (13 percent of the population), could easily secure 30 percent of the vote, based on their joint ethnicity alone.[12] Mr Odinga, who is of the Luo ethnic group (10 percent of the population) and the other 4 principals of the National Super Alliance (NASA) coalition namely; former vice-president and deputy prime minister Musalia Mudavadi of Luhya ethnicity (14 percent of the population), former vice-president Kalonzo Musyoka of Kamba ethnicity (10 percent of the population), former Senate minority leader Moses Wetangula of Luhya ethnicity and Isaac Ruto, who is a Kalenjin, could together easily secure 47 percent of the vote if their ethnicity is a reliable proxy; albeit only Mr Musyoka is on the presidential ticket with Mr Odinga.

Even as tribal loyalities do run deep, however, voting choices may not necessarily be tribally homogenous. Considering deputy president William Ruto is a more influential Kalenjin, Mr Isaac Ruto, who has boasted of bringing at least 1 million Kalenjin votes to the table, cannot be so confident, for instance. And the voters’ register does not necessarily reflect the exact tribal configuration of the population. That is, some tribes might have a greater representation in the register than their share of the population and vice versa. Besides, voter turnout on election day might not be similarly structured. And the loyalties of tribes like the Kenyan Somali (6 percent of population) might go either way, although they may not forgot too soon the court-botched closure of the Dadaab refugee camp by the ruling Jubilee government.[13]

Past election results could also be an indicator of how the candidates might fare this time around. Mr Mudavadi, who is not contesting for elective office in the upcoming polls, secured 3.96 percent of the 2013 presidential election votes. If summed with Mr Odinga’s 43.7 percent, their joint tally of about 48 percent, though impressive, would still fall short of the minimum 50 percent and one vote needed to secure a victory, however. That is in addition to having more than 25 percent of votes cast from at least half of the country’s 47 counties. But add those that could potentially come on the back of the other NASA prinicipals, an extra 2 percent might not be that difficult. In contrast, Mr Kenyatta cannot be assured he would get as much as the 50.5 percent of the vote that he got in 2013. Myriad allegations of corruption, a drought-induced grain shortage (albeit now ameliorated with government-subsidized imports) and so on, have likely eroded some of his support. It is also probable Mr Odinga’s populist and socialist rhetoric resonates more with voters than Mr Kenyatta’s capitalist drift.

Kenya Elections 1

Key Politicians & tribal affilliations
Name Political Party Ethnicity
Uhuru Kenyatta Jubilee Kikuyu
William Ruto Jubilee Kalenjin
Raila Odinga NASA Luo
Musaila Mudavadi NASA Luhya
Kalonzo Musyoka NASA Kamba
Moses Wetangula NASA Luhya
Isaac Ruto NASA Kalenjin

Source: Author’s research

Kenya Elections 2

IEBC must be beyond reproach
With such a tight race, much would depend on whether voters trust the Independent Electoral and Boundaries Commission (IEBC). What is significantly different this time around though, is that the election results declared at polling stations would have finality, as opposed to the past practice of making them provisional to final certification by the IEBC in Nairobi. That much the courts have affirmed: the IEBC failed in its appeal of the April 2017 court ruling which ordered that results declared at polling stations must not be subject to change at the national collation centre. [14] Such a decentralized system makes it more difficult to cheat, as all stakeholders would be able to do their own collation based on the same constitutency-level results. The increased transparency consequently is also why fears of violence may be overblown. Credit for these laudable changes must go to Mr Odinga and his coalition partners.

From April 2016 onwards, Mr Odinga and his supporters staged several protests demanding changes at the IEBC that would ensure the umpire is not in a position to fraudulently tilt the elections in favour of the incumbent. After a few deaths, the ruling Jubilee government agreed in August 2016 to replace the IEBC commissioners, which the opposition called biased.[15] One month later, Mr Kenyatta signed into law amendments to the electoral act that included new criteria for recruiting IEBC commissioners.[16]

Despite these gains, Mr Odinga and his coalition partners did not relent in their scrutiny of the IEBC. When the ruling Jubilee government would not budge on an issue, the opposition simply went to the judiciary for redress. Mr Kenyatta did not hide his irritation, as the courts seemed to be ruling more often in the opposition’s favour at some point, forcing a word of caution from Chief Justice David Maraga.[17] Jubilee tried to cast doubts on the credibility of at least one judgement unfavourable to it, citing conflict of interest.[18] Court of Appeal judge William Ouko, who was one of the five-member bench that ruled on the finality of election results at the constituency level, is related to Mr Odinga’s wife, for instance. [19] The niece of one of the NASA lawyers turned out to be married to one of the judges in another case that NASA won. [20] Were that to be a yardstick, however, then almost all the top judges could be conflicted. It is typical of the elite in the private and public sectors to inter-marry; after all, they often belong to the same social circles. Unsurprisingly, when the courts have been unfavourable to Mr Odinga, he has similarly accused Mr Kenyatta of intimidating the judiciary. The key point here is how deliberative combative both sides have been and how determined they are to win.

Procurement activities at the IEBC have also been marred by one controversy after another. It cancelled the tender for poll equipment in March 2017, for instance, amid accusations of corruption from the opposition.[21] [22] The awarding of the contract to print ballot papers to Dubai-based Al Ghurair, a company NASA claims has ties to Mr Kenyatta, is another[23], a charge the firm denies in a sworn affidavit.[24] A high court ordered Al Ghurair to stop the printing of presidential ballot papers regardless, but was later overturned on appeal as the IEBC expressed fears the elections could be delayed.[25] The controversy could have been avoided in the first place if proper tendering processes were followed. Because even before the Al Ghurair saga, the tender had been cancelled at least twice over irregularities, forcing the IEBC to send erstwhile procurement director Lawy Aura on compulsory leave in June 2017.[26] Information Technology director, James Muhati, received a similar treatment at about the same time when it emerged he was not being helpful with a systems audit. His replacement, Chris Msando, was found tortured and murdered in late July, a little over a week to the polls and just before a systems audit was scheduled.[27] Although, the IEBC has since discountenanced suggestions of a disruption consequently, it would be difficult to put in place another senior staff with the same level of competence, preparedness and, as was found, high integrity, within such a short period. Besides, it is highly improbable that Mr Msando’s assailants would have taken such a drastic step if they were not convinced that his replacement would either be less competent or prepared or more pliable. Regardless, they likely succeeded in getting enough information on the so-called Kenya Integrated Elections Management System (KIEMS) through torturing him. Thus, unless there is a re-configuration, KIEMS has likely been compromised. The proximity of the killing to the poll date also means a new ICT manager would not have enough time to gain the trust of the public like Mr Msando was able to. In fact, NASA has expressed fears the transmission of the election results may be hacked. To forestall this, it has asked that an independent international firm be tasked with overseeing KIEMS. IEBC chairman Wafula Chebukati disagrees, insisting the commission’s systems are secure and a competent team remains in place to ensure hitch-free elections.[28] Mr Chebukati could not be so sure that early on before the conclusion of substantive investigations. For an election considered to be Kenya’s most expensive yet, these negative events are quite concerning.

There is currently more than 300 cases at the courts against the IEBC.[29] The major ones, that is, those that could have delayed the elections, have been addressed, however. The one that relates to the printing of presidential ballots was earlier highlighted. Another suit by NASA asking the courts to stop the IEBC from using a manual voting system as back-up, has also been quashed. The worry of NASA of course, was that a manual system would be open to fraud. It had hoped voting would be exclusively electronic. But in light of the Nigerian experience where electronic voting kits failed on election day, it is probably wise to have a manual back-up. That is even as Jubilee may likely want the manual system backup for sinister reasons. What NASA had wanted was for the IEBC to postpone the elections should the electronic kits fail. This it hoped would demotivate any shenanigans like the electronic kits being made to deliberately fail just so the elections would be largely manual. Still, the myriad litigations even before an actual vote point to a potentially contentious election aftermath. It is a positive that at least the key questions that hitherto put a cloud over the elections, have been answered by the courts.[30]

Potential turnout holdups
A spreading cholera outbreak is not helpful either.[31] From the beginning of the year to 17 July, there were already 1,216 registered cases and 14 deaths. [32] The World Health Organisation (WHO) has classified it as high risk nationally and regionally. Should it deteriorate further, necessary quarantine measures would disenfranchise a swathe of voters. The authorities have already shut down venues where cases have been recorded and ordered the testing of about half a million people in July.[33] More stringent measures are probable. Furthermore, elections are being held this year amid a still challenging food supply environment. Government-sponsored imports to ameliorate the problem have been largely effective, though. But the arrangements have tended to run into problems from time to time. In July for instance, wheat prices rose on higher demurrage charges to ships carrying imported supplies, but were delayed at the ports. [34] A 2kg packet rose as much as 11 percent to 133 shillings from 120 shillings two months earlier. The food crisis came in handy for Mr Odinga, who harped on past warnings about the country’s dwindling grain reserves. A refusal to lift trade barriers with neighbouring Ethiopia to favour Jubilee acolytes’ maize import arrangements with Mexico, was fingered.[35]

Economic costs not likely as high despite fears
Historically, Kenyan economic growth suffers in election years.[36] There have been exceptions. In years when electoral reforms preceded the polls, there was no material negative economic impact that could be attributed. Typically, however, there is a 60 percent chance of a growth slump in an election year, if analysis based on World Bank and Kenyan National Bureau of Statistics data from 1990 is anything to go by. [37] So it is not too surprising that expectations are rife that this might also be the case for the 2017 polls. And the recovery has tended to range from 18-26 months, depending on whether the elections were single-party or multi-party based. [38] But the election-related slumps theory has not proved to be robust post-2002. True, growth was -1.1 percent in 1992 from 1.3 percent the year before. Similarly, growth slowed to 0.4 percent in 1997, another election year, from 4.2 percent in 1996. Growth also slowed to 0.5 percent in 2002 from 4 percent in 2001.

Interestingly, even with the violence that characterised the 2007 elections, growth actually rose higher to 6.9 percent that year from 5.9 percent the year before. This was also the case for the 2013 election year, which saw growth up to 5.7 percent from 4.6 percent in 2012. So, there is room to contend that growth might actually not suffer as much in the current election year. Most economic growth forecasts for 2017 remained around the 5 percent area a month to the elections despite these concerns. In its July 2017 update, the International Monetary Fund (IMF) put its forecast for 2017 at 5.3 percent; albeit lower than the 6 percent estimate for 2016.

Besides, if the IEBC succeeds in being as transparent as it has promised to be, earlier anxiety ahead of the polls might quickly translate into an aggressive push to regain lost economic ground afterwards. And what was largely city-centred violence in the aftermath of the bloody 2007 elections, could supposedly not be the case this time around. This is because as more power has been devolved to the counties since then, what is probable could be no more than small pockets of violence here and there at the local level, and not the type of co-ordinated anarchy in 2007.

Regardless, some remain convinced that there could be even more troubles this time around. One theory revolves around the intergenerational family rivalry between the Kenyattas and Odingas. Mr Odinga would be contesting for the fourth and likely last time, but second time against Mr Kenyatta. After a remarkably strife-filled political life ranging from imprisonment to exile, Mr Odinga is putting everything into this election. There is a family history that Mr Kenyatta is seeking to guard as well. Mr Kenyatta would likely be heartbroken if it turns out he lost to Mr Odinga, the son of his father’s arch-rival and who, like his father, he has managed to prevail over thus far.

Kenya Elections 3.png

Currency speculators, who are almost convinced the shilling would suffer losses over worries of a violent vote, have been having a field day. The Central Bank of Kenya (CBK) governor Patrick Njoroge has warned they would get their fingers burnt, pointing to ample foreign exchange reserves boosted by an IMF standing facility precisely for such potential shocks.[39]

Still, economic activity has slowed owing to the upcoming polls.[40] Manufacturers have been reducing their throughput and investors have not been investing as much. [41] International trade has also recorded dampened activity, as landlocked neighbours, who usually pass their cargoes primarily through the Mombasa port, have been diverting them to the Dar es Salaam port in Tanzania. [42] There is historical precedence for these actions. In the aftermath of the 2007 election violence, Ugandan and Rwandese traders reportedly lost 158 billion shillings, compensation for which the Kenyan authorities had no choice but to oblige. [43] This time around, it does not seem like they are taking any chances.

Travel advisories have also been issued by foreign governments, with multinationals reportedly giving their staff leave to move to neighbouring countries a week before and stay until a week after the polls. [44]

In general, most companies have suspended capital allocation decisions till after the elections. Businesses have also organised emergency drills for those staff that have little choice but to stay back during the election period. Tourism would suffer most definitely. Countries that have asked their citizens to take precautions, include the United Kingdom, France, Spain, Canada, Australia and Russia. Some companies have simply asked their staff to take their annual leave in August. These are just precautions of course. The polls may prove to be largely peaceful.

The author, Dr Rafiq Raji, is an adjunct researcher of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. This article was by the NTU-SBF Centre for African Studies on 4 August 2017. It was also by published by Africabusiness.com.

Links viz.


Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. http://www.businessdayonline.com/ethnic-politics-2017-kenyan-elections/

[1] Uhuru Kenyatta, Raila Odinga in dead heat – Infotrak poll (Daily Nation 24 Jul 2017) http://www.nation.co.ke/news/Infotrak-poll-shows-Raila-ahead-of-Uhuru/1056-4028786-ejfvfjz/index.html

[2] Uhuru Kenyatta, Raila Odinga in dead heat – Infotrak poll (Daily Nation 24 Jul 2017) http://www.nation.co.ke/news/Infotrak-poll-shows-Raila-ahead-of-Uhuru/1056-4028786-ejfvfjz/index.html

[3] Why did media ignore poll showing Raila ahead of Uhuru? (Daily Nation 23 Jul 2017) http://www.nation.co.ke/news/politics/Why-did-media-ignore-poll-showing-Raila-ahead-of-Uhuru–/1064-4027776-u3xb9tz/index.html

[4] Uhuru Kenyatta, Raila Odingsa to skip presidential debate(Standard, 5 Jul 2017) https://www.standardmedia.co.ke/article/2001246203/uhuru-kenyatta-raila-odinga-to-skip-presidential-debate

[5] Kenyan vice president candidate debates himself after rivals’s no-show (Reuters 18 Jul 2017) http://www.reuters.com/article/us-kenya-election-debate-idUSKBN1A3162?il=0

[6] Presidential debate: Uhuru cancels Samburu tour (Daily Nation 24 Jul 2017) http://www.nation.co.ke/news/politics/Presidential-debate-Uhuru-cancels-Samburu-tour/1064-4029880-nb81rk/index.html

[7] Kenyan president fails to show up for election debate (Reuters 24 Jul 2017) https://www.reuters.com/article/us-kenya-election-debate-idUSKBN1A92LJ

[8] Uhuru: Why I snubbed debate (Daily Nation 25 Jul 2017) http://www.nation.co.ke/news/politics/Uhuru-snubbed-debate/1064-4031612-b3yep5/index.html

[9] Kalonzo: How we tricked Uhuru and Jubilee to miss debate (Daily Nation 25 Jul 2017) http://www.nation.co.ke/news/Presidential-Debate-Kenya-Uhuru-Kenyatta/1056-4031404-grbxkf/index.html

[10] Why Jubilee, Nasa have focused campaigns on 5 zones (Daily Nation 13 Jul 2017) http://www.nation.co.ke/news/politics/Why-Jubilee–Nasa-have-focused-poll-campaigns-on-five-regions–/1064-4012734-n4biohz/index.html

[11] The role of ethnicity in Kenyan politics (DW 8 Feb 2017) http://www.dw.com/en/the-role-of-ethnicity-in-kenyan-politics/a-37442394

[12] Census: Here are the numbers (Standard 1 Sep 2010) https://www.standardmedia.co.ke/business/article/2000017306/census-here-are-the-numbers

[13] Rights groups welcome court ruling to block Kenya refugee camp closure (Guardian 9 Feb 2017) https://www.theguardian.com/world/2017/feb/09/kenyan-court-quashes-government-order-close-refugee-camp

[14] Kenyan court rules vote results declared at station are final (Bloomberg 23 Jun 2017) https://www.bloomberg.com/news/articles/2017-06-23/kenyan-court-rules-presidential-votes-can-be-declared-at-station

[15] Kenya clears out electoral officials after deadly protests (Reuters 17 Aug 2016) http://www.reuters.com/article/us-kenya-politics-idUSKCN10R1S6

[16] Kenya enacts law to replace electoral agency ahead of vote (Bloomberg 15 Sep 2016) https://www.bloomberg.com/news/articles/2016-09-15/kenya-enacts-law-to-replace-electoral-agency-ahead-of-vote

[17] Kenya president, chief justice clash as elections approach (Reuters 9 Jul 2017) http://www.reuters.com/article/us-kenya-election-idUSKBN19U0X2

[18] Jubilee alleges conflict of interest in Al Ghurair ballot papers case (The Star 10 Jul 2017) http://www.the-star.co.ke/news/2017/07/10/jubilee-alleges-conflict-of-interest-in-al-ghurair-ballot-papers-case_c1594456

[19] Jubilee alleges conflict of interest in Al Ghurair ballot papers case (The Star 10 Jul 2017) http://www.the-star.co.ke/news/2017/07/10/jubilee-alleges-conflict-of-interest-in-al-ghurair-ballot-papers-case_c1594456

[20] Jubilee alleges conflict of interest in Al Ghurair ballot papers case (The Star 10 Jul 2017) http://www.the-star.co.ke/news/2017/07/10/jubilee-alleges-conflict-of-interest-in-al-ghurair-ballot-papers-case_c1594456

[21] IEBC cancels tender for poll equipment, seeks lease (The Star 23 Mar 2017) http://www.the-star.co.ke/news/2017/03/23/iebc-cancels-tender-for-poll-equipment-seeks-to-lease_c1529673

[22] Probe ‘corrupt’ IEBC for cancelling poll equipment tender, says Mudavadi (The Star 23 Mar 2017) http://www.the-star.co.ke/news/2017/03/23/probe-corrupt-iebc-for-cancelling-poll-equipment-tender-says-mudavadi_c1530331

[23] NASA links Jubilee officials to Al Ghurair tender, wants Chiloba sacked (The Star 14 Jun 2017) http://www.the-star.co.ke/news/2017/06/14/nasa-links-jubilee-officials-to-al-ghurair-tender-wants-chiloba-sacked_c1579637

[24] We have never met Uhuru, Al Ghurair now claims in affidavit (The Star 27 Jun 2017) http://www.the-star.co.ke/news/2017/06/27/we-have-never-met-uhuru-al-ghurair-now-claims-in-affidavit_c1586814

[25] NASA loses cross-appeal on Uhuru links to Al Ghurair (The Star 20 Jul 2017) http://www.the-star.co.ke/news/2017/07/20/nasa-loses-cross-appeal-on-uhuru-links-to-al-ghurair_c1600686

[26] IEBC fires procurement director over ballot tender (The Star 7 Jun 2017) http://www.the-star.co.ke/news/2017/06/07/iebc-fires-procurement-director-over-ballot-tender_c1575518

[27] Kenya election official tortured, murdered before vote, officials say (Reuters 31 Jul 2017) http://www.reuters.com/article/us-kenya-election-death-idUSKBN1AG1B5

[28] IEBC systems secure, Wafula Chebukati says (Daily Nation 1 Aug 2017) http://www.nation.co.ke/news/IEBC-systems-secure-Chebukati-Msando/1056-4040634-w5ak74/index.html

[29] Kenyan election body fighting over 300 lawsuits as vote looms (Reuters 20 Jul 2017) https://af.reuters.com/article/africaTech/idAFKBN1A52EM-OZATP

[30] Court declares IEBC can use manual system (Daily Nation 21 Jul 2017) http://www.nation.co.ke/news/Nasa-loses-yet-another-court-battle/1056-4025664-7eewwd/index.html

[31] WHO sees high risk from Kenya cholera outbreak (Reuters 21 Jul 2017) http://www.reuters.com/article/us-kenya-cholera-idUSKBN1A61HU

[32] WHO sees high risk from Kenya cholera outbreak (Reuters 21 Jul 2017) http://www.reuters.com/article/us-kenya-cholera-idUSKBN1A61HU

[33] Cholera kills four in Kenyan capital since May, government shuts hotels (Reuters 19 Jul 2017) https://www.reuters.com/article/us-kenya-health-idUSKBN1A417I

[34] Wheat prices rise again as imports delay at port (BusinessDaily 20 Jul 2017) http://www.businessdailyafrica.com/markets/news/Wheat-prices-rise-again-imports-delay-airport/3815534-4025046-on836m/index.html

[35] Raila wants Kiunjuri, Bett and Lesiyampe sacked for failing to end food shortage (The Star 8 Jun 2017) http://www.the-star.co.ke/news/2017/06/08/raila-wants-kiunjuri-bett-and-lesiyampe-sacked-for-failing-to-end-food_c1576049

[36] Why economy slows in election years (Daily Nation 23 Apr 2016) http://www.nation.co.ke/newsplex/kenya-election-2017-gdp/2718262-3173194-moknsqz/index.html

[37] Why economy slows in election years (Daily Nation 23 Apr 2016) http://www.nation.co.ke/newsplex/kenya-election-2017-gdp/2718262-3173194-moknsqz/index.html

[38] Why economy slows in election years (Daily Nation 23 Apr 2016) http://www.nation.co.ke/newsplex/kenya-election-2017-gdp/2718262-3173194-moknsqz/index.html

[39]‘Chill’, Kenya central bank tells shilling speculators as election nears (Reuters 18 Jul 2017) http://af.reuters.com/article/africaTech/idAFKBN1A310A-OZABS?utm_source=34553&utm_medium=partner

[40] Economic activity slows down ahead of General Election (The East African 26 Jul 2017) http://www.theeastafrican.co.ke/business/Economic-activity-slows-down-ahead-of-General-Election-/2560-4032474-syhlq6/index.html

[41] Economic activity slows down ahead of General Election (The East African 26 Jul 2017) http://www.theeastafrican.co.ke/business/Economic-activity-slows-down-ahead-of-General-Election-/2560-4032474-syhlq6/index.html

[42] Economic activity slows down ahead of General Election (The East African 26 Jul 2017) http://www.theeastafrican.co.ke/business/Economic-activity-slows-down-ahead-of-General-Election-/2560-4032474-syhlq6/index.html

[43] Economic activity slows down ahead of General Election (The East African 26 Jul 2017) http://www.theeastafrican.co.ke/business/Economic-activity-slows-down-ahead-of-General-Election-/2560-4032474-syhlq6/index.html

[44] Economic activity slows down ahead of General Election (The East African 26 Jul 2017) http://www.theeastafrican.co.ke/business/Economic-activity-slows-down-ahead-of-General-Election-/2560-4032474-syhlq6/index.html

NTUSBFCAS | Doing Business: Can Nigeria replicate the Singapore model like Mauritius did?

By Rafiq Raji, PhD

It is undeniable that there is a correlation between a country’s business environment, foreign direct investment inflows and international trade performance. Countries that make setting up businesses easy, allow clearance of goods at ports with little hassle, grant entry and exit visas to investors and visitors alike in quick time, enable the registration of property with little trouble, provide reliable electricity, and make documentation like construction permits easy to acquire, attract more foreign direct investment (FDI). [1] The easier it is to do these things, the more likely cross-border and broader international trade would flourish.[2] These benefits are what motivate countries to try to improve their business environments, more so now that capital is increasingly choosy and circumspect.

Country GDP per capita

(US$) (2016) (PPP)

Overall DB rank (over 190) Trading across borders (over 190)
Singapore 87,855 2 41
Mauritius 20,422 49 4
Rwanda 1,977 56 6
Botswana 17,042 71 3
South Africa 13,225 74 25
Kenya 3,361 92 9
Seychelles 27,602 93 5
Zambia 3,880 98 31
Lesotho 3,601 100 2
Namibia 11,290 108 17
Ghana 4,412 108 29
Nigeria 5,942 169 181

Source: IMF, Doing Business 2017: Equal Opportunity for All (World Bank, Oct 2016) [3]

Singapore as role model
Singapore is the quintessential example. In the World Bank Ease of Doing Business (DB) 2017 rankings, Singapore is second out of 190 countries ranked globally, having topped the rankings at least nine times since they began in 2004.[4] With a GDP per capita on purchasing power parity (PPP) basis of US$87,855 (2016), it is one of the wealthiest countries in the world. More than three decades earlier, its GDP per capita of about US$8,852, was just one-tenth of its current level. Between 1980-2016, the Singaporean economy grew twenty-five times over from US$12 billion to US$297 billion. Its remarkable success is testimony to the heights any country can reach on the back of sustained reforms and reinvention. In Singapore, contracts matter and are readily enforced, the resolution of insolvencies are not tedious, there is little or no red tape in conducting tax affairs and cross-border trade thrives consequently. In spite of the second place ranking referred to above, Singapore is still widely acclaimed as the easiest place in the World to do business in.[5]

One aspect of doing business in foreign countries that investors dread, is that of dispute resolution. Court processes can be unnecessarily long and slow in most jurisdictions. Singapore overcame this constraint by automating the process, with almost all litigation activities (e.g., submission of claims, payment of court fees, serving of initial summons, etc.), outside of those requiring the physical presence of the litigants or their lawyers, doable online.

Even as some aspects of the Singaporean model are clearly replicable, attempts at copying it often falter when some of the necessary conditions that enabled the Southeast Asian nation to succeed, are missing. “Remaking is essential”: A country must be willing to reinvent itself when the variables change. [6] So just because a model proves successful over a certain period, does not mean it would be a good fit when the times change, as they always do. “Collective response” and “social consensus” also matter a great deal. [7] A determined leadership in the absence of an equally enthused followership may still flounder. Singapore has the unique distinction of having both. Still, there are probably just two essential ingredients for success. First, there must be the political will for reforms.[8] Second, and probably most important of all, the political leadership must be in a secure position and endure long enough for what are sometimes painful reforms, to translate into concrete progress.[9] The two identified prerequisites go together. Otherwise, longstanding African regimes could easily have been similarly transforming. Unsurprisingly, with political will lacking, most are not. There are a few exceptions, however. That is, cases where there have been both the political will for reforms and stable government to see them through. Successes recorded by Mauritius, Botswana and Rwanda, as the DB rankings show, offer a ray of hope for the continent. In line with the Singaporean evolution, their experience also adds to evidence about the identified necessary ingredients for success. In other words, they offer a template on how to assess the likelihood of success of many other countries, African ones especially, who now seek to be similarly attractive to foreign investors.

The case of Mauritius
The one African country that has consistently topped the rankings on the continent, and sometimes dubbed the “Singapore of Africa” – Rwanda also shares the epithet these days – is Mauritius (ranked 49 in the latest DB rankings).[10] [11] [12] Although the Mauritian economy (GDP of US$12 billion) is relatively small when compared with continental giants like South Africa (US$294 billion) and Nigeria (US$406 billion), it is one of the wealthiest. Its remarkable evolution especially suggests the Singapore model can be successfully replicated by African countries. Like Singapore, Mauritius ranks high for good governance and its politics is quite stable.[13] Mauritius’ strong institutions have also been widely acknowledged to be a key success factor.[14] Its cosmopolitanism, similar to that also evidenced in city and coastal states like Singapore, together with similarly close ties to China and India, were also crucial to the development of its manufacturing sector.[15] There is also a consensus in the literature about the huge role its trade policies played in its rapid development.[16] Preferential trade access agreements with key export markets and investment incentives via export processing zones (EPZs), enabled it to develop an apparel and textile manufacturing base, for instance. There is also now a vibrant light manufacturing sector. In addition, tax incentives have enabled Mauritius to become a preferred destination for offshore financial services, and was hitherto a major channel for Indian capital flows, a feat it competes with Singapore to achieve. Unsurprisingly, Singapore and Mauritius already explore palpable synergies between them, signing an air corridor agreement in October 2015, for instance.[17]

Mauritius especially highlights its DB ranking when pitching to foreign investors, and is acknowledged to be for Africa what Singapore is to Southeast Asia. However, unlike Singapore, it has not been similarly successful in getting foreign businesses that register within its jurisdiction, to actually situate the bulk of their operations within the country. That is why it is widely considered to be mostly a tax haven, a characterisation Mauritian authorities dislike and would like to disabuse. Unsurprisingly, its goods exports trend is not impressive, unlike the Singaporean example. It is noteworthy though that a bulk of its goods exports emanate from its EPZs. Lately, Mauritius has been forced to address these deficiencies, as developed economies crack down on tax havens and avoidance schemes and hitherto lucrative tax arrangements are renegotiated. Mauritius, which does not charge a capital gains tax, used to be the preferred destination for channelling capital to India, where capital gains tax can be as high as 40 percent and accounted for a quarter of its foreign capital inflows.[18] This may change from April 2017, when India started charging taxes on investments from Mauritius, after the more than 3-decade tax treaty between the two countries was amended in May 2016.[19] Consequently, Mauritius has ramped up its African focus, with more than half of foreign companies registered by it in the past few years, aiming to do business on the continent.

Corruption and poor governance may weigh on Nigerian reforms
Other African countries have been trying to improve their business environments.[20] Even so, most African countries remain in the lower rungs of the DB rankings, with South Africa and Kenya respectively at 74 and 92 out of 190 in the most recent one. Still, more than a quarter of ease of doing business reforms in 2015-16 were by Sub-Saharan African (SSA) countries, with Kenya one of the top 10 improvers globally. [21] Others seek to join the list of top improvers. Most recently, Nigeria (DB rank: 169) has made a splash about its DB reforms, announcing a 60-day action plan in late February 2017.[22] Nigeria’s abysmally poor non-oil goods exports is another motivation for the authorities’ forced reformist stance, after low crude oil prices over the past two years starved the government of revenue. Crude oil exports constituted more than 90 percent of total goods exports between 2009-15. That is, even as total goods exports were less than 20 percent of GDP on average. Unfortunately, attempts at using EPZs to spur export of manufactures have been slow-moving, with the most promising one (Lekki Free Trade Zone) still largely at development stage.

Fundamentally, the recently proposed DB reforms are aimed at increasing international trade and FDI. This is what motivates the three broad areas that Nigerian authorities have identified for reform: entry and exit of goods, entry and exit of people and government transparency and procurement. Agencies at the ports are to be reduced to six, from almost a dozen. Visitors to the country would be able to get visas on arrival, and those that apply at the country’s embassies, would hopefully get theirs within 2 days.

Incidentally, attempts were made in the past to sanitize the maritime ports.[23] That the bottlenecks remain point to the intense pushback reformers tend to face. Corruption is a principal motivation and is why Nigerian ports are some of the most expensive to clear goods at.[24] A report commissioned by the ports authority in October 2016, found that Nigerian authorities lose about N1 trillion annually to corruption at the ports. [25] Under new leadership, the ports authority has embarked on an anti-corruption war. Expectedly, it has come under attack, with death threats and mudslinging in tow.[26]

To demonstrate progress, Nigerian authorities announced in April 2017 that the number of days for registering a business had been reduced to two days from at least ten days, as part of reforms to ease doing business in the country.[27] Ordinarily, the activity takes longer than the statutory 2 working weeks hitherto. With that now reduced to two days, it could be reasonably expected that new business registration would be accomplished in a week, say. How was this achieved? Automation. Similar to how Singapore (and many other countries that copied its model since) was able to get rid of human-related bottlenecks to the ease of doing business, some of the tortuous tasks would now be done electronically. For instance, a lawyer would no longer be required to prepare registration documents, as some of the tasks they charge for could easily be done online by the prospective business owner. Also, such arduous tasks, in the Nigerian context at least, like registering with tax authorities, have been integrated into the government’s company registration portal. Additionally, lawyers at the business registry can now certify incorporation forms and other statutory compliance declarations for a token fee, tasks previously done by lawyers hired by the prospective business owner.

Considering how extraordinarily frustrating the Nigerian legal system is, the knotty issue of dispute resolution may be a hard nut to crack. Setting up specialist courts like Singapore did has not been similarly effective because the judiciary is as yet not equipped for the automation element. Judges still write their judgements by long-hand, there are no audio recording facilities in courts and virtually all documentation is in hard copy form. These deficiencies are why even with specialist courts like the National Industrial Court, Investments and Securities Tribunal and so on, cases can sometimes take years before resolution. And even when successful after years of litigation, red tape can be craftily deployed by a well-connected local partner or disputant to make the whole exercise seem like a total waste of time. A much broader reform of the Nigerian judiciary would have to presage any potential measure directed specifically at the ease of doing business. Understandably, the proposed DB reforms focus on those issues that can be easily fixed. But considering how important dispute resolution is to increasing investor confidence – as the Singaporean and Mauritian examples show – lack of progress in this regard only buttress the poor governance characteristic of the Nigerian business environment. And as earlier highlighted, entrenched interests, corruption and inter-agency rivalry at the ports, mean multiple inspections and continued unwholesome practices, which increase the lead time of goods clearance, would probably endure and continue to stymie the country’s trade performance. Patronage networks around doing business in Nigeria, beneficiaries of which include politicians and their lackeys in every facet of government, would be difficult to dismantle as well.

Nonetheless, even the slightest attempt at improving the Nigerian business environment should be applauded. Still, it would take at least a year of monitoring to determine how much difference the announced reform moves would make and if that would eventually be reflected in the Doing Business rankings. Besides, there are other more entrenched problems that would require time and determination to fix. With Nigerian politics still relatively fragile, and even simple activities like passing the budget enmeshed in much wrangling, the risk remains that these new reforms may suffer the fate of earlier botched ones. That said, the legislature has expressed support for the efforts of the executive and aims to pass relevant legislation to ensure the DB reforms become codified in law and hopefully survive future administrations. As at late April 2017, two of the identified fifteen DB legislative bills had already been passed.

Despite recent crackdowns on treasury looters and other corrupt persons, corruption would be harder to tackle, however. There is the impression that should there be a change of government after the 2019 elections, the current anti-corruption momentum is likely to slow. Besides, a judiciary not in trend with the times would likely continue to slow the wheel of justice. And defense lawyers have proved to be quite deft at beating the system: successful prosecutions of high-profile corruption cases are rare. Thus, if one were to use the Singaporean and Mauritian success stories as templates, scepticism about the potential success of current reform proposals would be somewhat justified. Still, even the slightest reduction in red tape would bring tremendous relief to those foreign investors who are already decided on doing business in the country. Besides, foreign companies who have anyway managed to make hay despite the many constraints, could do with the efficiencies that some of the reforms would potentially bring about; that is, despite the risk of holdups down the line. But with a still fragile political fabric – evidenced by much infighting within even the ruling political party, which is an agglomeration of strange bedfellows of sorts – endemic corruption and poor governance, the reforms may yet flounder. There needs to be a “collective response” and “social consensus” around the reforms for them to succeed.

Dr. Rafiq Raji wrote this article for the NTU-SBF Centre for African Studies at the Nanyang Business School, Singapore, where he is an adjunct researcher. See link viz. https://www.ntusbfcas.com/african-business-insights/content/doing-business-can-nigeria-replicate-the-singapore-model-like-mauritius-did

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/business-can-nigeria-replicate-singapore-model-like-mauritius/